Waiting for the bottom?

A lot of people shopping for houses today are moving very cautiously towards making a purchase as they keep their eye on the depreciating prices of houses. Everyone wants to buy at the “bottom” of the market – which is a natural feeling – who wants to buy something today and have it be worth less in 6 months.

One of the challenge with this is that we are not going to know when the bottom hits until we can look back and point at it in our rear-view mirrors. Once prices start to rise at some point, we will know, for sure, when the bottom was. Until then, we’re all just guessing – and gambling.

The second thing to consider is really a math exercise. If, for example, there is a home that you like that you can currently buy for, let’s say, $250,000. If you wait 3 more months, the price might drop to, let’s say $230,000 giving you a “savings” of $20,000.

Let’s look closer at that $20,000. You have to consider what it is costing you NOT to buy for another 3 months. If you are a first time buyer and you are currently renting, that means that you’ll be paying rent for 3 more months and not enjoying a tax deduction on the interest you’ll be paying in your new mortgage. The earlier in the year you make a purchase, the bigger your deduction will be on April 15, 2010.

If you currently own a home, compare your current interest rate to what you would be paying if you made a move sooner than later. If you’re current rate is, let’s say, 7% and you can get a mortgage on your new home for 5%, how much will you be saving on your monthly payment.

Everyone’s situation is going to be a unique but you should take the time and do the math to figure out how much it will cost you to wait for “the bottom.” You might be surprised.

Very good information! Every house owner that has a mortgage on the house, as well as those who want to buy a house should be aware of the risks he is exposed to and should think twice before he signs!